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 UPDATED I have just finished reading 2 weeks' worth of articles and blog posts about the Sokol Debacle. While (virtually) everyone agrees that he behaved unethically, it's striking how quickly most writers dismiss the possibility that Sokol could be found guilty of insider trading.  Insider trading is hard to prove, but until more facts are known, it seems a bit early to jump to conclusions about whether Sokol will be charged with or be found to have committed insider trading. Only a few facts are publicly known, and it appears that even Buffett/Berkshire may have had incomplete information when they declared that Sokol did nothing "unlawful." At this point, I'm agnostic on the insider trading question until more facts are known. Some speculations about related issues:

>  I suspect Sokol's story will continue to crumble and more evidence will emerge that suggests he was in possession of what some would consider material nonpublic information when he bought the stock in Lubrizol (whether or not he is charged with anything). There were gaps and holes in the story given out in Sokol's ill-conceived CNBC interview, including a vagueness about how the idea of Lubrizol first came to his attention. Chances are that more details will be forthcoming and they will not be flattering to Sokol because whatever is flattering has already come out in his own version of the story.

> IThe old truism that the cover-up is worse than the crime may come into play. (p.s. I use the term "crime" partly as a metaphor because most insider trading cases are civil, not criminal.) Statements made in Sokol's CNBC interview have been contradicted by Lubrizol's amended preliminary proxy statement. Although a cash deal, Berkshire's acquisition of Lubrizol must be approved by Lubrizol's shareholders, and therefore public communications before the vote presumably are subject to scrutiny for how they might affect the transaction's consummation or its price. From a statement in a March 24, 2011 Department of Justice press release by William J. Maddalena, Acting Special Agent in Charge of the FBI's Miami Office, about an (unrelated) criminal case: "When false statements are disseminated to deceive the investing public, whether they're designed to prop up a company or tear it down, the FBI will dedicate all available resources to bring disseminators of such falsehoods to justice." Even if Sokol's intended purpose was not primarily to protect and enable the acquisition, he was clearly a beneficiary by $3 million if it was consummated.

> I think it's very likely that Buffett will distance himself from Sokol at at the shareholder meeting, without necessarily doing a 180 degree turn and saying he was mistaken in the original press release.

> CHANGE IN POINT OF VIEW. ORIGINALLY I didn't think Buffett was going to entertain questions on this subject at the meeting. I think he'll talk about it for maybe five or ten minutes in a statement at the beginning of the meeting, much of which time will be a recap of what happened. He could then cite litigation as a reason for why he can't have an open-ended discussion and take questions. However, my current thought is that it doesn't really matter whether he formally takes questions or just makes a statement. Whatever he decides to say in advance, he can put out in any format he wants, including answering some questions that don't contain any information beyond what he's willing or able to share. The derivative litigation is almost certain to constrain what is said, whether that is specifically identified or not. Either way, I'm pretty sure Buffett will open with a statement about Lubrizol because nobody will be able to pay attention to the rest of what he says until he puts this to rest. 

> Whatever he says, listen carefully to the nuances. I know that many of you are preparing to interpret these statements, and also are drafting questions for the meeting that touch on important topics other than the question of insider trading. Let me remind you once again that everything Buffett says is extremely precise and literal. The implications of his statements will be bounded by the exact words employed, no more and no less. Make your interpretations and draft your questions accordingly.

 Munger tells FT he doesn't think Sokol intended anything wrong. Says it was "optics." Differentiates his purchase of BYD from Sokol's of Lubrizol while saying they were alike in one respect (they both owned stock in a company Berkshire acquired).

> More than gentlemanly of Munger, after Sokol dragged him into the spotlight on CNBC. Nobody would be asking questions about BYD if Sokol hadn't raised it as an issue. BYD is not a valid comparison. Munger bought BYD years earlier; fully disclosed it; recused himself. I thought it was rather low-class of Sokol to make the BYD comparison, even if he was like the drowning guy who pulls anyone he can grab underwater with him.

> Look for more post-blowup damage control after this interview, in the form of support from whichever Buffett friends and any such media as can be found to assist. If past unpleasantnesses are a guide (General Re) only about 1% of the iceberg will be visible on the surface, so I would not jump to a whole lot of conclusions from what anybody says.

> In addition, public opinion is already quite firm. The question being asked is not "What more can Buffett & Co. tell us to convince us they're right?" but rather "When will Buffett reverse gears and do the right thing?" by saying he's reconsidered it and the stock purchases were inappropriate and didn't meet Berkshire's standard of behavior. 

More, and more nuanced, thoughts about what went right and wrong. 

> Buffett lives by the principle "praise by name, criticize by category." This not only is a natural aspect of his personality, but it is the carrot way of influencing people and it works.  This is so ingrained in him that it's hard for him to understand the rationale for any other course of action.

> Buffett wants companies to sell themselves to Berkshire. Casting out managers, shaming them and making them look like crooks, is not helpful in reeling more companies into the boat.

I believe Buffett automatically gravitated toward giving Sokol a face-saving exit that minimized what he had done. And Buffett's desire to show tolerance, to use the carrot, to maintain a serene image, all these are valid concerns. But the number one thing that Buffett has to worry about is his own and Berkshire's reputation.  It was simply more important for Buffett to send a signal to his employees and the world about what behavior will not be tolerated at Berkshire than to allow Sokol to save face. The face-saving hurt the press release's credibility when it stated that what Sokol did was "not unlawful" -- it's premature to conclude that -- said the departure was unconnected to the stock trading, and omitted Sokol's departure date. 

Buffett and Munger themselves have addressed questions related to this topic many times. One is Munger's parable of the little old lady who steals from the cash register at See's. As Munger puts it, you have to fire her even if she claims she only did it that one time because it never was just that one time, and also you have to maintain clear standards. There are other examples, with "lose a shred of reputation," and the "newspaper test" the most obvious.

The little old lady at See's raises another point. It's important for Berkshire to show that there is no significant double standard for people Buffett likes or has endorsed. As Munger puts it, Invert. I'm pretty sure that if a mid-level manager had done the same thing as Sokol, he would be out in a trice and Berkshire would make no bones about the reason. 

Unanswered questions about what happened remain. We don't know what Sokol told Buffett. Sokol and Buffett agree it was a passing mention, which implies the timing and amount of trading was not disclosed. Whatever was said, it was memorable enough to stick in Buffett's mind and to cause him to mention it to Munger. It was not memorable enough to make him pursue the details at the time. We don't know whether it was considered significant enough to be mentioned to anyone else (such as the Berkshire board) while the transaction was under consideration and being voted on. We also don't know what caused it to rise into Buffett's mind afterwards so that he had Marc Hamburg follow up and get the details. All this leaves a bit of a mystery.  "Stock trading" might have rung a little bell prompting Buffett to ask some questions. However, it clearly was Sokol's responsibility to ensure that his boss understand the important, relevant details. If Buffett might have been a better detective, then that is minor compared to Sokol's failure to fulfill his duty to disclose.

Lastly, what accounts for the harsh reaction and the way the discussion has turned toward Buffett in the past few days? For one thing, he's the big fish. Number two: all eyes on are Berkshire. Is this situation representative of a more serious, systemic problem? The consensus seems to be trending toward yes. In addition, Buffett has scolded Wall Street, greedy CEOs, cowardly auditors, asleep-at-the-switch regulators, risk-indifferent traders, and on and on in his shareholder letters. He has argued over and over for a tax code that would take a larger share from the rich. In so doing, he has written some of the best and most influential business prose of modern times. He also has made a number of enemies, set himself up for charges of hypocrisy, and now people are throwing rocks at him. I predict there will be an overreaction. Don't expect it to end anytime soon.

 Here's the story from the perspective of Aviation Week.